The emotional development of young children in families with parental psychpathology is examined. Families are those in which one parent has a history of bipolar affective illness or in which there is no diagnosed parental psychopathology. Children 10 to 12 months old are followed longitudinally. Observations of children's responses to emotional events in the familial environment are obtained from trained parent observers and are also videotaped during home visits. In laboratory sessions, children's positive and negative peer interactions are assessed. Children are also diagnosed for psychopathology. Children's responses to emotions, both the transient and enduring distress states of others, provide information about how children develop and maintain adaptive and maladaptive patterns of coping with environmental stresses.